31 March 2010 22:07 [Source: ICIS news]
By Nigel Davis
HOUSTON (ICIS news)--Growing away from the slump, producers are filling underutilised capacities but are not yet wholly clear of just what they might need in future.
That uncertainty clouds the petrochemicals outlook.
Companies are “cautiously optimistic”, although that has become a tired phrase. The world is just about back to where it was - in terms of economic output - before the slump. Consultants are projecting stronger basic chemicals and plastics growth out to 2015 compared with the 2000 to 2005 period.
So was the peak of the cycle - or the chemicals earnings “plateau” that some like to call it - an aberration? More likely than not, it was. Markets remained tight as demand continued to rise. Prices were pushed higher by the inflated oil price.
But the consumer has given up on chemicals, or at least on so many of the products that are purchased when times are good but not when cash is tight.
Fiscal stimulus has underpinned growth for a worryingly long time. It has done its job, certainly, but as it is relaxed the strength of consumer - and hence chemicals - demand is exposed.
That is as true of ?xml:namespace>
Filling inventories give some a sense of optimism but the question increasingly is: who is going to supply those volumes - and, when it returns, real, consumer-led, demand growth?
Gross domestic product (GDP) growth in the
As consultants Chem Systems point out in a just released report, lengthening markets in
We are in the midst of a great capacity wave. “At least five new crackers, with a combined capacity totalling more than four million tonnes/year of ethylene achieved commercial production in the first quarter,” the consultants say. “Most crackers were integrated with further new derivative capacity on site,” they add.
And those plants came on as
Polyvinyl chloride (PVC) imports plunged 55% year on year to 99,230 tonnes and were down 19% from January.
The slowdown had been expected. We’ll have to wait for March data to get a better feel for what demand growth is heading this year.
That adds significantly to the uncertainty.
CMAI reckons that 26% of global basic chemicals and plastics capacity currently is not operating. New plants are coming on-stream but by no means all are running hard. That is good news for most - although not for the plant operators - given generally fragile demand. But it is supporting a false picture. Olefins and polyolefins markets in western Europe and
The industry is widely expected to grow out of this situation but, more likely than not, in fits and starts. Managing production operations and supply chains effectively will remain difficult through much of 2010.
Bookmark Paul Hodges’ Chemicals & the Economy blog
Read John Richardson and Malini Hariharan’s Asian Chemical Connections blog
Click here to find out more on the Europe, Asia and
To discuss issues facing the chemical industry go to ICIS connect
For the latest chemical news, data and analysis that directly impacts your business sign up for a free trial to ICIS news - the breaking online news service for the global chemical industry.
Get the facts and analysis behind the headlines from our market leading weekly magazine: sign up to a free trial to ICIS Chemical Business.
|ICIS news FREE TRIAL|
|Get access to breaking chemical news as it happens.|
|ICIS Global Petrochemical Index (IPEX)|
|ICIS Global Petrochemical Index (IPEX). Download the free tabular data and a chart of the historical index|
Asian Chemical Connections